Will virtual asset taxation be delayed again…"Cannot rule out the possibility of a 4th deferral"

Domestic virtual asset (cryptocurrency) taxation may be delayed once again, according to an analysis.

Kim Gap-rae, a senior research fellow at the Korea Capital Market Institute, said in a recent report, "Despite three deferrals, key gaps in the taxation system remain unaddressed," and added, "In the current state, it is hard to guarantee implementation in 2027, and a fourth deferral is fully possible."

Virtual asset taxation was introduced by the 2020 amendment to the Income Tax Act, but the implementation date has been postponed from 2022 to 2023, 2025, and is now delayed until 2027. Following the market crash in 2021, exchange closures, and major fraud cases, there were continued criticisms that investor protection mechanisms were lacking, and the reporting system and taxation standards were not properly established, causing repeated delays in implementation. Although the regulatory framework was established with the enactment of the Act on the Protection of Users of Virtual Assets in 2023, the tax system has remained stagnant, according to assessments.

The researcher cited as the biggest problems of the current system the lack of taxation standards for domestic and foreign transactions such as overseas and decentralized exchanges, the absence of an established taxation method for non-residents, gaps in criteria for calculating acquisition costs, and ambiguity over the timing of taxation. He explained, "The Supreme Court applies strict tax law principles, so regulatory gaps would immediately lead to practical confusion."

A taxation system for income from activities such as lending, rendering, and staking has also not been effectively established. The government has not presented criteria for whether these activities fall under taxable "lending," and a system to capture related information has not been built. Taxation standards for blockchain-specific revenues such as airdrops, hard forks, and mining are also analyzed to be very unclear compared with major countries such as the United States.

The report warned, "In the current deficient state of the system, implementation in 2027 is practically difficult," and added, "If the taxation gap is prolonged, not only will market confusion occur, but calls to 'postpone again' will re-emerge, undermining policy credibility."

Alternatives for stable implementation were also presented. It argued that taxable items, methods, and timing should be clearly defined by income type, and that a system for collecting domestic and international transaction information should be built by linking it with exchanges and personal wallets. It also suggested the establishment of a 'Virtual Asset Taxation Reform TF' within the tax authority to expedite detailed design. It emphasized that the National Assembly should also consider measures to make it mandatory to submit plans to resolve taxation gaps during deliberations on the Income Tax Act.

Kim said, "It should be reexamined whether the current system that simply classifies virtual assets as 'other income' is appropriate," and "As virtual assets have become investment assets, broad tax discussions on issues such as offsetting gains and losses, carryforward deductions, and parity with financial investment income should proceed in parallel."

He added, "Taxation deferral is only a temporary measure," and "To implement in 2027, the entire virtual asset taxation system must be reorganized to reflect reality."